Red Hat Inc. (RHT, Financial) released its third-quarter financial results after the market closed on Dec. 17. Having witnessed robust subscription growth during the quarter as well as steady demand for its hybrid cloud technology solutions, the company registered strong earnings and revenue.
Snapshot of the quarter
The company posted quarterly profit of $94 million, or 51 cents per share, which came in weaker than anticipated due to an increase in marketing and research and development expenditures. However, non-GAAP earnings per share were 96 cents, up 32% from the year-ago quarter. The open-source software company recorded quarterly revenue of $846.8 million, up 13% from the same period last year. Subscription revenue, which accounts for 87% of the company’s total revenue, inched up 13% year over year to $741 million.
Shifting gears, the company had GAAP operating income of $109 million, which plunged 8% on a year-over-year basis. On the other hand, the GAAP operating margin came in at 12.9%.
GAAP and non-GAAP operating cash flow for the quarter amounted to $137 million. For the quarter ended Nov. 30, the company’s balance of cash and cash equivalents and investment stood at a combined $2.2 billion after repurchasing roughly $13 million worth of stock.
Hybrid cloud technology steers Red Hat’s earnings
Red Hat’s bottom-line growth was powered by growing demand for hybrid cloud technology and vigorous subscription growth. Subscriptions were on the rise during the quarter thanks to emerging technologies like OpenShift and Ansible, which are used for the development, deployment and management of applications.
In a statement, CEO Jim Whitehurst commented on Red Hat's performance.
“Adoption of Red Hat’s technologies that enable customers to build and deploy applications more securely and consistently across hybrid and multi-cloud environments continued to drive our growth in Q3,” he said.
In the fast-growing tech sector, the company has to be dynamic, which is why it is currently focusing on hybrid cloud architecture and cloud-enabling technologies. Therefore, the company bought Boston-based tech company NooBaa last week.Ă‚
IBM to acquire Red Hat
In October, the software company agreed to be bought by International Business Machines Corp. (IBM, Financial) in a $34 billion deal. Due to the impending transaction, Red Hat did not provide an outlook for fiscal 2019.
Disclosure: I do not hold any positions in the stocks mentioned.
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